1) Property, Plant and Equipment

The disposals within technical equipment and machinery as well as other assets, plant and other equipment mainly comprise replacement purchases. There is an opposite effect from additions to property, plant and equipment following the inclusion of the acquired companies in the consolidated companies.

As in previous years, no self-constructed assets were capitalised in the 2016 financial year. No write-downs or reversals were performed in the year under review. Property amounting to € 10,357 thousand (2015: € 10,979 thousand) belonging to the group is used as collateral for long-term loans (cf. Note 11 "Financial liabilities").

2) Goodwill

The following table shows the residual carrying values of technotrans goodwill, broken down by segment:

31/12/2016

31/12/2015

€ '000

€ '000

segment Technology: Laser Cooling

5,243

5.243

segment Services: Translation Services

585

585

segment Services: Software solutions for technical doumentation

176

0

6,004

5,828

Goodwill in the amount of € 17,140 thousand results from the acquisition of the shares of GWK Gesellschaft Wärme Kältetechnik mbH at September 9, 2016. Allocation of the goodwill had not yet been completed by the time of preparation of the Consolidated Financial Statements. There are no indications of a need for goodwill impairment. According to IAS 36.84 the goodwill was not yet tested for impairment.

The goodwill resulting from the acquisition of the shares of the KLH companies with effect from January 1, 2013 as well as the acquisition of the shares of the Termotek Group with effect from January 7, 2011 was tested for impairment at the level of the Laser Cooling group cash-generating units within the Technology segment, because synergies and advantages from the business combinations can only be determined at that level. Equally, the goodwill is monitored exclusively on the basis of this cash-generating unit.

Goodwill of € 585 thousand was recognised as an asset in connection with the acquisition of gds Sprachenwelt GmbH on September 1, 2012. This goodwill is allocated to the Translation Services cash-generating unit in the Services segment.

The goodwill of € 176 thousand in connection with the acquisition of the shares of Ovidius GmbH at April 12, 2016 was allocated to the cash generating unit of software solutions for technical documentation.

The remaining cash-generating units were tested for impairment according to IAS 36.10 in the 2016 financial year. For this, the carrying amount of a cash-generating unit is compared with the recoverable amount. The recoverable amount is the higher of the two amounts of the fair value less proceeds of disposal, and the value in use. The fair value measurement was classified as a Level 3 fair value based on the input factors of the measurement technique used.

At technotrans, the recoverable amount corresponds to the value in use. The key assumptions made for this value in use were as follows: the starting point for the cash flow forecasts for goodwill was the budget for 2017 and revenue trends for the 2018 to 2021 financial years of the respective cash-generating units. No separate revenue plans for the cash-generating units in question were drawn up for subsequent financial years; instead, further average revenue growth rates of a constant 1.5 percent (2015: 1.5 percent) (long-term market trend for the respective industry) were assumed for both cash-generating units. Furthermore, the costs (materials, personnel and other costs) for each cash-generating unit were estimated on the basis of assumptions for the forecasting period; cost increases were suitably taken into account. All assumptions by the Board of Management are based on experience and reflect expectations concerning the relevant customers and industry.

The following table indicates the growth rates and EBIT margins used for impairment testing in 2015 and 2016, plus the cost-of-capital rates used in discounting the forecast cash flows.

revenue growth

average EBIT margin

after tax capital cost rate

2016

2015

2016

2015

2016

2015

Parameters used for the impairment test

%

%

%

%

%

%

segment Technology: Laser Cooling

6.6

6.4

9.7

11.0

10.7

13.0

segment Services: Translation Services

5.0

5.0

15.0

11.8

9.9

11.5

segment Services: Software solutions for technical doumentation

13.7

6.5

6.6

The values in use determined on the basis of these assumptions each exceed the carrying amounts of the cash-generating units.

3) Intangible Assets

In the 2016 financial year there was an increase in intangible assets, substantially as a result of the assets identified within the context of the purchase price allocations (cf. Note II a) “Consolidated Companies”). Depreciation and amortisation was applied to these assets in the financial year in accordance with their useful lives. Depreciation and amortisation of € 1,508 thousand (2015: € 720 thousand) concerns the intangible assets recognised in the course of purchase price allocation.

Intangible assets arising from development activities are capitalised pursuant to IAS 38 if it is probable that future economic advantage will accrue from the use of the asset and the costs of the asset can be reliably determined. Only current development work was conducted in the 2016 financial year. Therefore no (2015: € 185 thousand) intangible assets arising from development were recognised. Due to nonfulfilment of the requirements for recognition as stated in IAS 38, development costs amounting to € 5,534 thousand (2015: € 4,293 thousand) were recognised as an expense.

There are no concessions, industrial and similar rights or development expenditure recognised as an intangible asset with an unlimited useful life. The useful life taken as the basis for the amortisation of software and development expenditure recognised as an intangible asset is three to five years.

In the Income Statement, the amortisation of development expenditure recognised as an intangible asset is allocated to the cost of sales using the function of expense method, according to the principle of causation. The amortisation of concessions, industrial and similar rights is allocated to the cost of sales, distribution costs, administrative expenses and development costs by means of cost centre accounting.

4) Other Financial Assets

31/12/2016

31/12/2015

€ '000

€ '000

Rent deposits

61

38

Other

31

10

92

48

5) Inventories

31/12/2016

31/12/2015

€ '000

€ '000

Raw materials and supplies

13,019

9,085

Work in progress

8,698

3,806

Finished goods and merchandise

3,892

4,656

25,609

17,547

The significant increase in inventories is substantially the result of the increased scope of consolidation.

Of total inventories, the amount of € 5,632 thousand (2015: € 3,880 thousand) is reported at the fair value, less production costs still to be incurred and distribution costs. Impairment of inventories totalling € 1,143 thousand (2015: € 436 thousand) was recognised as an expense in the 2016 financial year. Reversals of € 946 thousand (2015: € 632 thousand) in the same period led to an income, as higher net realisable values could be assumed than in the previous year.

6) Trade Receivables

In the Technology segment, receivables outstanding are owed mainly by major OEMs (printing press, mechanical engineering companies and laser manufacturers), as well as by end customers.

In the year under review, additions to the impairment of receivables totalling € 86 thousand (2015: € 286 thousand) were booked to distribution costs in the Income Statement. Impairment was applied in order to measure the receivables at fair value. This impairment reflects the actual credit risk. Impairment is applied in particular if the debtor is experiencing considerable financial difficulties. The amounts stated for trade receivables are fundamentally adjusted via a value adjustment account. Receivables are only derecognised once the debtor has opened insolvency proceedings or the receivable has become uncollectable.

The following table provides an overview of impairment of receivables:

31/12/2016

31/12/2015

€ '000

€ '000

Opening level

1,097

1,155

Addition of company acquisition

473

0

Allocated

86

286

Derecognition of receivables

-45

-307

Cash receipts for receivables written off

-73

-53

Exchange differences

-3

16

Closing level

1,535

1,097

7) Income Tax Receivable

This comprises ongoing income tax receivable as well as corporation tax credit balances from previous years. These rebates (Section 37 (5) of the German Corporation Tax Act) are capitalised at the present value. The rebates are being paid in ten equal annual instalments between 2008 and 2017; the income tax receivable was correspondingly allocated exclusively to current assets in the financial year.

8) Other Assets

31/12/2016

31/12/2015

€ '000

€ '000

Other financial assets

Receivables from suppliers

192

19

Deposits

173

246

Other

359

201

724

466

Other assets

Prepaid expenses

669

558

Creditable input tax

194

157

Other

304

379

1,167

1,094

1,891

1,560

9) Cash and Cash Equivalents

Cash and cash equivalents comprise balances with banks and cash on hand. The fair value of cash and cash equivalents corresponds to the carrying amount. There were no marketable securities at the balance sheet date.

The development in cash and cash equivalents is shown in the Cash Flow Statement.

10) Equity

The development in equity is shown in the Statement of Movements in Equity. The equity of the group totalled € 61,880 thousand at December 31, 2016 (2015: € 51,725 thousand). Of this, € 118 thousand (2015: € 928 thousand) is attributable to non-controlling interests.

Issued Capital

At December 31, 2016 the issued capital (share capital) of technotrans AG comprised 6,907,665 issued and outstanding no par value registered shares. The shares outstanding are fully paid. Each no par value share represents a nominal amount of € 1 of the share capital. All shares carry identical rights. No special rights or preferences are granted to individual shareholders. The same applies to dividend entitlements.

Shared issued

Shares outstanding

2016

2015

2016

2015

Position at January 1

6,907,665

6,907,665

6,530,588

6,516,434

Issurance of treasury shares

0

0

374,915

0

Issued to employees (as remuneration component)

0

0

2,162

2,187

Acquisition of tresury shares

0

0

9,254

0

Issued to employees (as Christmas bonus)

0

0

9,254

11,967

Position at December 31

6,907,665

6,907,665

6,907,665

6,530,588

Authorised Capital

The Annual General Meeting on May 15, 2014 authorised the Board of Management to raise the share capital, with the consent of the Supervisory Board, by the issuance of new shares on one or more occasions by May 14, 2019, against contributions, by up to a total of € 3,450,000. No use was made of this authorisation in 2016.

Conditional Capital

At the Annual General Meeting on May 15, 2014 the Board of Management was, with the consent of the Supervisory Board, authorised to issue bearer and/or registered bonds with a term of a maximum of five years on one or more occasions up until May 14, 2019 of an aggregate nominal amount of up to € 10 million and to grant the bearers of bonds conversion options on up to 690,000 no par value registered treasury shares in accordance with the respective terms of the bonds (convertible bond terms).

The conversion options granted to the bearers of the bonds may cover shares in the company representing an amount of up to € 690,000.00 of the share capital. As well as in euros, the convertible bonds may be issued in the legal currency of an OECD country, limited to the corresponding euro countervalue.

The shareholders have a fundamental right to subscribe to bonds. The bonds may also be accepted by a bank or a consortium of banks with the obligation to offer them to the shareholders for subscription. In addition, however, the Board of Management is, with the consent of the Supervisory Board, authorised to exclude the statutory subscription right of the shareholders to the bonds within the limits laid down individually and specifically by the authorisation.

The Board of Management is authorised, with the consent of the Supervisory Board, to specify the further details of the issuance and features of the convertible bonds and their terms itself, meaning in particular the currency, interest rate, issuing amount, term and denomination of the convertible bonds, the conversion price and period, the exchange ratio and payment of the countervalue in money instead of exchange for treasury shares. This authorisation was not used in the 2016 financial year.

Capital Reserve

The premium from the past share issues from the issuance of shares under conversion options from conditional capital and from the issuance of ordinary shares from authorised capital (capital increase for contribution in kind) was paid into the capital reserve. The costs of the share issues were deducted.

In the financial year, the remaining 377,077 treasury shares were released at a price that was above the original cost. The difference of € 6,169 thousand between the cost of the shares and their fair value at the time of issuance, resulting from the release of treasury shares, was allocated to the capital reserve. The IFRS capital reserve corresponds to the capital reserve of the parent company according to the German Commercial Code. As a result of the change in 2009 to comply with the German Accounting LawModernisation Act (BilMoG), in the event of disposal of treasury shares those amounts that would not have been allocated to the capital reserve under a purely IFRS approach must, after the change, likewise be allocated to the German Commercial Code capital reserve (devaluation from the period prior to the change). To maintain the German Commercial Code and IFRS capital reserves at identical levels, appropriate amounts are therefore withdrawn from the retained earnings and allocated to the capital reserve.

Retained Earnings

The retained earnings include profit carried forward and additional other reserves. Of these, an amount of € 691 thousand (2015: € 691 thousand) relates to the legal reserve of technotrans AG pursuant to Section 150 (2) of German Stock Corporation Act. The reserve for treasury shares of technotrans AG (2015: € -5,426 thousand) was fully wound up with the disposal of the remaining shares.

Pursuant to Section 268 (8) of German Commercial Code, an amount of € 9 thousand (2015: € 108 thousand) due to the capitalisation of deferred taxes as well as an amount of € 16 thousand (2015: € 0 thousand) attributable to the difference pursuant to Section 253 (6) of German Commercial Code from the measurement of the provision for pensions may not be distributed from the other retained earnings of the parent company.

Other Reserves

31/12/2016

31/12/2015

€ '000

€ '000

Exchange differences

-3,721

-3,338

Reserve for net investments in a foreign operation

-2,047

-2,584

Hedging reserve

-58

-100

Treasury shares

0

-5,426

-5,826

-11,448

Pursuant to IAS 39, the negative market value of the interest rate swaps used was recognised in the hedging reserve with no income effect, following deduction of deferred taxes (cf. Note 32 “Financial instruments”). In the 2016 financial year, a gain of € 60 thousand (2015: loss of € 49 thousand) was reported within equity with no effect on income. As in the previous year, no gains were realised. In return, deferred tax of € 18 thousand (2015: € 15 thousand) was booked with no effect on income.

technotrans AG has extended loans to its subsidiaries that are to be regarded as net investments in foreign businesses. Pursuant to IAS 21.32 and IAS 12.61A, the accumulated translation differences up to the balance sheet date and any taxes on these are netted directly within equity. Exchange rate differences are only recognised through profit or loss upon liquidation or partial liquidation of the company.

In the 2016 financial year, currency translation gains from the above loans in the amount of € 537 thousand (2015: € 655 thousand loss) were netted directly within equity; because their liquidation or partial liquidation are not planned for the foreseeable future, as in the previous year no deferred taxes on these exchange rate losses were netted income-neutrally within equity in the financial year.

The exchange differences include differences from the translation of the subsidiaries’ equity to be consolidated at the historical rate and at the rate on the balance sheet date. This item furthermore includes the differences resulting from the translation of the assets and liabilities of the international subsidiaries at the closing rate and from the translation of the expenses and income at the average rate for the year.

Treasury Shares

At the Annual General Meeting on May 15, 2014 the shareholders authorised the Board of Management to buy back treasury shares in accordance with Section 71 (1) No. 8 of German Stock Corporation Act. The scope of this authorisation is for the buying back of a portion of up to € 690,000.00 of the share capital (690,000 no par value shares, corresponding to 9.98 percent of the share capital at the time of the resolution) and is valid until May 14, 2019. Pursuant to IAS 32.33 the shares bought back are deducted from equity at their cost (including incidental costs). The buy-back is in line with the strategic objectives of the company. 9,254 shares were bought back during the period January to December 2016 for issuing to employees. In the 2016 financial year, a total of 11,416 no par value shares (2015: 14,154 no par value shares) with a fair value of € 262 thousand (2015: € 247 thousand) were issued to employees by way of a remuneration component. The remaining 374,915 shares were sold at a fair value of € 8,154 thousand. At the balance sheet date of December 31, 2016 no (2015: 377,077) ordinary shares were held by technotrans AG.

Capital Management

At December 31, 2016 the equity ratio was 51.0 percent (2015: 68.0 percent). One of the most important financial objectives for technotrans AG is to assure its solvency at all times, and increase the long-term value of the group.

The creation of adequate liquidity reserves is very important in this respect. The aim is always to have liquidity reserves amounting to at least 5 percent of annual revenue. This objective is achieved by implementing various measures in order to reduce capital costs and optimise the capital structure, alongside practising effective risk management.

Methodologically, technotrans’ capital management approach is based on financial market oriented indicators, such as the return on sales (long-term target margin for EBIT: 10 percent), the equity ratio (target: > 50 percent) and gearing. technotrans is not subject to capital requirements laid down in the articles of incorporation. A sound capital structure provides technotrans with the stability that serves as the basis for a business model focusing on sustainability, and thus in the long term meets both the requirements of customer and supplier relations and serves the needs of the employees and shareholders.

An unsecured loan carries the obligation to adhere to certain financial indicators (financial covenants). The financial ratios, equity ratio, gearing and EBITDA margin are determined for the Consolidated Financial Statements and were complied with in the 2016 financial year.

11) Financial Liabilities

31/12/2016

31/12/2015

€ '000

€ '000

Short-term borrowings

5,068

1,997

Long-term borrowings

23,024

6,061

28,092

8,058

An amount of € 20,000 thousand of the rise in financial liabilities results from the raising of new loans to finance the corporate acquisition of GWK Gesellschaft Wärme Kältetechnik mbH and from the provision of financing for the acquisition of the business premises in Meinerzhagen planned for 2017. The companies acquired in the financial year account for € 2,031 thousand of the financial liabilities at the reporting date.

There were no hedged liabilities at the balance sheet date. Interest rate hedges exist only in the case of financial liabilities.

Terms to Maturity of Financial Liabilities

< 1 year

1 - 5 years

> 5 years

Total

Interest p.a.

Collateral

€ '000

€ '000

€ '000

€ '000

€ fixed rate credit

556

2,963

1,481

5,000

1.00%

None

Variable € credit

429

1,714

857

3,000

3-months EURIBOR +1.59%

None

€ fixed rate credit

0

1,071

1,429

2,500

1.45%

Land charge

€ fixed rate credit

0

937

1,563

2,500

1.45%

Land charge

€ fixed rate credit

0

937

1,563

2,500

1.70%

Land charge

Variable € credit

571

1,286

0

1,857

3-months EURIBOR viainterest rate swap(fixed rate: 2.63%)

None

Variable € credit

1.500

0

0

1,500

3-months EURIBOR viainterest rate swap(fixed rate: 2.70%)

Land charge

€ fixed rate credit

237

1,263

0

1,500

1.45%

Land charge

Variable € credit

0

1,500

0

1,500

6-months EURIBOR +1.25%

Land charge

€ fixed rate credit

300

1,200

0

1,500

1.65%

Land charge

€ fixed rate credit

422

528

0

950

2.00%

None

€ fixed rate credit

245

675

0

920

3.31%

Land charge

€ fixed rate credit

36

143

639

818

4.50%

Land charge

Variable € credit

157

432

0

589

3-months EURIBOR viainterest rate swap(fixed rate : 3.40%)

Land charge

Variable € credit

188

140

0

328

3-months EURIBOR viainterest rate swap(fixed rate : 2.81%)

Land charge

€ fixed rate credit

87

217

0

304

1.71%

Chattel mortgage

lease purchase

48

136

0

184

3.05%

Chattel mortgage

€ fixed rate credit

18

70

39

127

2.35%

Chattel mortgage

€ fixed rate credit

43

71

0

114

3.10%

Chattel mortgage

lease purchase

31

65

0

96

3.08%

Chattel mortgage

€ fixed rate credit

12

50

28

90

2.10%

Chattel mortgage

€ fixed rate credit

59

0

0

59

3.35%

None

€ fixed rate credit

50

0

0

50

3.50%

None

€ fixed rate credit

21

26

0

47

3.10%

Chattel mortgage

€ fixed rate credit

35

0

0

35

2.70%

Directly enforce-able guarantee

€ fixed rate credit

11

1

0

12

3.15%

Chattel mortgage

€ fixed rate credit

12

0

0

12

3.25%

Chattel mortgage

5,068

15,425

7,599

28,092

Amounts owed to banks with a carrying amount of € 14,747 thousand (2015: € 3,880 thousand) are collateralised by land charges on the company premises in Sassenberg.

The loan of Ovidius GmbH in the amount of € 35 thousand is secured by a directly enforceable guarantee by the shareholder-manager.

Of the loans of GWK Gesellschaft Wärme Kältetechnik mbH amounting to € 1,995 thousand, the sum of € 986 thousand is secured by chattel mortgages on the plant in question. No collateral was furnished for loans amounting to € 1,009 thousand.

12) Other Financial Liabilities

31/12/2016

31/12/2015

€ '000

€ '000

Contingent purchase price Ovidius GmbH

1,104

0

Assumption of debt company acquisition GWK

248

0

Long-term liabilities from finance lease

7

14

Conditional purchase price of KLH

0

346

1,359

360

The remaining shares in the KLH companies were acquired in the 2016 financial year. The conditional purchase price still outstanding was measured at fair value at the time of acquisition and reduced by € 180 thousand. The outstanding conditional purchase price was settled through payment of the purchase price.

With regard to the conditional purchase price obligation in the context of the corporate acquisition of Ovidius GmbH and the assumption of liabilities in the context of the corporate acquisition of GWK Gesellschaft Wärme Kältetechnik mbH, please refer to Note II a) “Consolidated Companies”.

13) Trade Payables

All trade payables have a term of up to one year.

31/12/2016

31/12/2015

€ '000

€ '000

Trade payables

3,780

2,000

Outstanding purchase invoices

1,029

433

4,809

2,433

14) Prepayments Received

The prepayments received originate in the main from project business. They are used for financing the finished goods included in the inventories but from which no revenue has yet been realised. Of the prepayments received, € 4,166 thousand concerns project business of GWK Gesellschaft Wärme Kältetechnik mbH.

15) Provisions

Obligations to personnel

Payments to be made under warranty

Other provisions

Provisions for pensions

Total

€ '000

€ '000

€ '000

€ '000

€ '000

Opening level at January 1, 2016

4,483

851

967

250

6,551

Exchange rate movements

19

3

-6

0

16

Used

3,103

684

923

11

4,721

Reversed

325

111

200

0

636

Addition of company acquisition

773

439

1,489

0

2,701

Compounding

308

0

0

4

312

Allocated

3,478

906

1,155

33

5,572

Closing level at December 31, 2016

5,633

1,404

2,482

276

9,795

Long-term provisions

898

0

15

265

1,178

Short-term provisions

4,735

1,404

2,467

11

8,617

The obligations to personnel consist largely of gratuities, bonuses and performance-related pay for employees, as well as time credits. It is in the first instance uncertain when these obligations will have to be met.

There are partial retirement employment contracts with two employees. The obligation from these partial retirement employment contracts was determined actuarially. The calculation is based on an interest rate of 1.8 percent (2015: 2.3 percent). Partial retirement obligations are covered against possible bankruptcy pursuant to Section 8a of the German Partial Retirement Act. To provide cover, cash was paid into a money market fund (Deka Investments) and pledged in favour of the employees. Under IAS 19.7 the assets constitute “plan assets” and are netted with the corresponding provision. Income from the plan assets is netted with the corresponding expenses. No income was realised in the 2015 and 2016 financial years. Cash of € 63 thousand was invested at December 31, 2016 (2015: € 42 thousand).

Provisions for warranties are created for current statutory, contractual and constructive warranty obligations towards third parties. The provisions were measured taking experience as the starting point, incorporating the circumstances at the balance sheet date.

In the course of its general business activities technotrans is involved in court and out-of-court litigation, the outcome of which cannot be predicted with certainty. Litigation may for example arise in connection with product liability cases and warranties. Where such risks arising are not already insured against, provisions are formed if a call is probable and the likely amount of the provision required can be estimated reliably. At the balance sheet date provisions of € 1,018 thousand were formed for litigation settlements from product liability and warranties.

The miscellaneous other provisions comprise costs for the preparation of the annual accounts, commission payments and other costs. In this case, too, the factor of uncertainty is principally the amount in question.

A direct pension pledge has been made to employees of the former BVS Beratung Verkauf Service Grafische Technik GmbH. Pensions are already paid for all employees. The “defined benefit obligation” (DBO) for purposes of calculating the provisions for pensions was determined on the basis of an actuarial report, using the 2005 G reference tables published by Prof Dr Klaus Heubeck. The calculation is based on an interest rate of 1.0 percent (2015: 2.1 percent) and a pension trend of 2.0 percent (2015: 2.0 percent) . The development in pay levels and employee fluctuation were not taken into account, as those eligible for pensions have since left the company. The interest costs for the DBO in 2016 amount to € 5 thousand (2015: € 5 thousand). The actuarial loss amounts to € 33 thousand (2015: € 2 thousand gain). The actuarial loss was recognised in other comprehensive income. Pension payments amounting to € 11 thousand (2015: € 11 thousand) were made in 2016.

16) Income Tax Payable

In the year under review, income tax payable relates substantially to technotrans AG and its controlled companies as well as KLH Kältetechnik GmbH.

17) Other Liabilities

31/12/2016

31/12/2015

€ '000

€ '000

Other financial liabilities

Loans

1,102

0

Debtors with credit balances

434

177

Assumption of debt company acquisition GWK

248

0

Current liabilities from derivative financial instruments

83

144

Conditional purchase price of KLH

0

9

Other financial liabilities

764

202

2,631

532

Other liabilities

Sales tax

1,073

588

Operating taxes

847

369

Liabilities in respect of social insurance

119

123

Other

637

574

2,676

1,654

5,307

2,186

The loan of € 1,102 thousand reported here is in respect of the leasing company of GWK Gesellschaft Wärme Kältetechnik mbH. This loan is to be repaid with the acquisition of the property in the 2017 financial year.

With regard to the assumption of liabilities in the context of the corporate acquisition of GWK Gesellschaft Wärme Kältetechnik mbH, please refer to Note II a) “Consolidated Companies”.